Orrstown Financial Services reported third-quarter 2026 net income of $22.8 million, up from $21.2 million in the second quarter and $21.9 million a year earlier. Diluted earnings per share rose to $1.17 from $1.09 in the prior quarter and $1.13 in the third quarter of 2025.
Net interest income increased $4.5 million sequentially to $53.3 million, while net interest margin widened 25 basis points to 4.12% from 3.87% in the second quarter. The company said the second quarter margin included $1.6 million of accelerated amortization expense tied to redeemed subordinated notes; excluding that item, the second-quarter margin was 4.00%.
Loan balances climbed $95.3 million, or 9% annualized, from June 30 to September 30, reaching $4.2 billion. Commercial loans increased $45.4 million, home equity lines of credit rose $31.6 million, and first lien residential mortgages added $17.0 million. At the same time, classified loans fell 8% during the quarter to $45.2 million, and nonaccrual loans declined to $22.9 million from $23.8 million. Nonaccrual loans as a share of total loans improved to 0.54% from 0.58%.
Deposits slipped $38.1 million, or 3% annualized, to $4.6 billion. Time deposits fell $28.1 million, interest-bearing demand deposits dropped $25.1 million, non-interest-bearing deposits declined $24.8 million, and savings deposits decreased $8.7 million. Those declines were partly offset by a $48.6 million increase in money market deposits. The loan-to-deposit ratio moved up to 92% from 89% in the prior quarter.
Borrowings increased to $417.3 million from $274.8 million as the company used more funding to support loan growth. Investment securities declined $29.9 million to $919.4 million, while unrealized losses on the portfolio widened by $41.6 million.
Credit costs moved modestly higher. Provision expense on loans was $1.1 million, up from $0.4 million in the second quarter. Net charge-offs were $1.0 million, down from $1.2 million. The allowance for credit losses rose to $46.8 million from $46.6 million, though it represented a smaller share of loans at 1.11% versus 1.13%.
Noninterest income fell $0.4 million to $13.4 million, with swap fee income down to $0.4 million from $0.7 million and mortgage banking income down to $0.2 million from $0.4 million. Wealth management income edged up to $6.0 million from $5.9 million.
Noninterest expenses decreased $0.4 million to $37.3 million. Professional services expense fell to $1.0 million from $1.2 million, other operating expenses dropped to $3.9 million from $4.3 million, and advertising and bank promotions expense fell sharply to $0.4 million from $1.1 million. Salaries and benefits increased to $22.4 million from $22.2 million.
The effective tax rate rose to 19.4% from 14.2%, while the company recorded a $0.4 million income tax benefit from federal tax credit purchases, down from $1.6 million in the prior quarter.
Shareholders’ equity declined to $605.2 million from $621.7 million. Tangible book value per common share fell to $25.96 from $26.71, and the tangible common equity ratio moved down to 9.1% from 9.5%. Return on average tangible common equity improved to 17.52% from 16.86%.
The board declared a cash dividend of $0.30 per share, payable November 10, 2026, to shareholders of record on November 3. Following these announcements, the company's shares moved 1.91%, and are now trading at a price of $42.10. Check out the company's full 8-K submission here.
